Nudge, nudge, win, win

A few years ago tax collectors in Minnesota were grappling with a problem governments have been trying to crack for decades: how to get people to fill in their tax returns on time. They tried various approaches, from threatening fines to sending out leaflets, but nothing seemed to work.

Then they tried something you'd never come across in a traditional policy textbook. Instead of threatening or cajoling the public, they simply publicised a single fact: most Minnesotans had already filled in their returns. The result? The number of people submitting tax forms shot up almost overnight.

Classic economic theory cannot tell you why this happens, because it's based on the assumption that humans always act in their own self-interest. But as we all know, humans aren't always rational. We do things we know we shouldn't, like eating too much or not saving enough. And, as the Minnesota example shows, we're also powerfully influenced by the people around us.

Social scientists refer to this as the importance of "social norms", and it's just one of the fascinating insights from the emerging fields of behavioural economics and social psychology. But the impact has stretched far beyond academia. It is enriching our understanding of human behaviour and changing the way policymakers think.

The Conservative party is at the forefront of this new intersect. We've been engaging with leading experts in this field, including Robert Cialdini, the author of Influence, and Richard Thaler, the co-author of Nudge, to develop policies that will work in a post-bureaucratic age where Labour's clunking tax and regulation measures have all too often failed.

Let me give three examples of how the emerging theories can be applied to policy practice.

First, social norms can be used to promote energy efficiency. A Conservative government will require household energy bills to contain information enabling families to compare their energy consumption with that of similar homes. As we have seen from pilots in America, this information can have a massive impact on energy consumption, as households who are using more than the average reduce their energy use to come into line with the norm. And as long as households that are using less than the average are given some sort of positive recognition - for example a special mark on their energy bill - they don't increase their energy use to fit in with the average. Without the use of any intrusive tax or regulatory instruments, overall energy consumption falls.

Second, we will encourage councils to pay people to recycle. The UK sends more waste to landfill than any European country. Labour's response is to push councils towards fines and fortnightly bin collections that won't work. Behavioural economics and social psychology helps us understand why. Evidence shows that people respond much better to incentives than punishments. Look at America, where waste companies such as RecycleBank pay households in more than 500 cities and towns about £20 a month for recycling. They can afford this because of savings they deliver for local authorities in landfill tax bills. This approach has increased recycling by up to 200%, without additional government spending, and turned poorer communities from the worst recyclers to among the best. That's why I announced last week that we are working with the mayor of London and Conservative councils across the country to roll out trials of this innovative policy.

Third, we can "nudge" people to act more responsibly. Take store cards, for example. Right now, consumers are often enticed to sign up for a store card at the shop counter, only to end up lumbered with problem debts because they hadn't had a chance to think about what they were doing. That's why, as part of a set of policies to tackle problems with personal debt, we will introduce new rules that mean people are given a cooling off period of at least seven days between signing up for a store card and being able to use it. This will give people the opportunity to stop and think about whether other forms of credit might offer them better value, or whether they want to make that purchase at all.

Our work with the world's leading behavioural economists and social psychologists is yet more proof that the Conservative party is now the party of ideas in British politics. Gordon Brown needs to get on board with this new agenda, and fast. If he doesn't, he shouldn't be surprised if he gets nudged out of office sooner rather than later.